The Myth of 100 Percent Channel
Many vendors tout their commitment to the indirect sales model and success of their partners. Some even go as far as to say they’re 100 percent channel, meaning they only go to market through resellers and other intermediaries. It’s a nice sentiment, but nowhere near reality.
By Larry Walsh
Many vendors tout their commitment to the indirect sales model and success of their partners. Some even go as far as to say they’re 100 percent channel, meaning they only go to market through resellers and other intermediaries.
It’s a nice sentiment, but nowhere near reality. A 100 percent channel-focused vendor is a myth, period. By going 100 percent channel, vendors believe they clear the routes to market, ensuring solution providers don’t perceive a potential for conflict. But having a mix of direct and indirect revenue sources isn’t a bad thing.
The challenge vendors face is earning the trust of their channel partners. They erect mechanisms and policies, such as deal registration and hard decks that define selling zones, to minimize conflict between direct and indirect sales. Vendors, no matter how much they appreciate the channel, need control (management), predictability and reliability in their sales forces. If they set a goal, they need a reasonable expectation that their sales channels – direct and indirect – will produce the requisite revenue. Unfortunately, vendors have neither the predictability nor control over how the channel operates or performs.
Channel programs exist to direct the performance of channel partners. Enablement programs, incentives, backend rewards, sales and technical support entice partners to invest in account development and closed sales. Tiered benefits – the standard precious-metal structures of Gold, Silver and Bronze – weight perks for the best performers, rewarding partners through meritocracy. And certification requirements get partners to invest in and remain committed to vendor brands and products.
Vendors cannot dictate how partners perform. Vendors and partners can agree on target markets, sales goals and expectations, but compliance is voluntary. If a partner does not perform, the vendor has little recourse except to lower its benefits and rewards. All the while, vendors spend millions of dollars developing and maintaining support mechanisms for performing and underperforming partners.
The channel’s inconsistent performance leads every vendor to question its validity and necessity. No one vendor operating in the channel has an ironclad commitment to solution providers. Executive teams at some of the most stalwart channel-friendly vendors periodically challenge the channel model and wonder why they support it without a better rate of return. Channel chiefs are persistently in the crossfire of defending their channel partners while pushing their companies to remain engaged in indirect sales.
And, of course, there’s customer choice. Just as vendors cannot tell partners how to perform or produce, they cannot tell customers where to buy. Certain companies, particularly large enterprises, only buy direct believing they’ll receive better prices, service and support. Vendors would rather compromise their channel ideals to capture a sale through direct mechanisms than run the risk of a competitor getting the business.
Customer choice and the need for predictable sales performance are the reasons nearly every vendor has a direct sales team. Even the most ardent channel-centric vendors have some direct sales in place to support customers and complex products.
Does this mean channel conflict is a given? Certainly. In fact, channel conflict isn’t a bad thing. It can be a motivator, pushing vendors and solution providers to define unique capabilities and value propositions to differentiate themselves from competition. Mixed go-to-market models require definition and management to control conflict, but they’ll never eliminate it.
Another way of looking at vendors is recognizing them all as 100 percent direct – even the channel-centric ones. Why? Every route to market is a direct route, and channel partners – resellers, service providers, technology partners – are all customers. Partners can choose which products they buy and resell, making it incumbent on the vendor to earn and retain their business. In that sense, a vendor is always selling direct, even if the consumer isn’t the ultimate customer.
It’s time for vendors to shake off this idea of being 100 percent channel and embrace a total commitment to the customer, no matter who that customer is. By seeing everyone downstream as a customer, vendors can craft better relationships and engagements that lead to greater levels of productivity and returns on investment. Assertions of being 100 percent channel are nothing more than press-release hyperbole.